University of Richmond Law Review

Volume 3 | Issue 1 Article 8

1968

Recent Decisions

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Recommended CitationRecent Decisions, 3 U. Rich. L. Rev. 202 (1968).Available at: http://scholarship.richmond.edu/lawreview/vol3/iss1/8

RECENT DECISIONS

Administrative Law-PRIVILEGED COMMUNICATIONs-WITNESS' TESTr-MONY IN HEARING WHERE JUDICIAL SAFEGUARDS NOT PRESENT Lim-ITED TO QUALIFIED PRIVILEGE FOR SLANDER.-Elder v. Holland, 208Va. 15, 155 S.E. 2d 369 (1967).

Elder brought an action for slander against Holland, a state policeman,arising out of the latter's testimony in a hearing conducted by the superin-tendent of state police. The hearing had been called to determine thepropriety of Elder's dismissal from the force for alleged misconduct. Hollanddemurred to Elder's bill of particulars2 which conceded that the testimonywas offered during a hearing. The trial court sustained the demurrer with-out giving reasons. On appeal, held, reversed and remanded to give plaintiffan opportunity to prove actual malice.' Although defendant's statement wasmade in the course of a hearing, it was entitled to only a qualified privilegeunder the law of libel and slander.

Statements by participants in both judicial4 and quasi-judicia 5 proceed-ings are absolutely privileged for slander and libel.6 When a proceeding

I The plaintiff's action was also brought under the Statute of Insulting Words, VA.CODE ANN. § 8-630 (1957), but ". . . this section is treated precisely the same as anaction for slander . . . for words actionable per se . . . except that no publication isnecessary." Carwile v. Richmond Newspapers, 196 Va. 1, 6, 82 S.E.2d 588, 591 (1954).

2 VA. SUP. Cr. App. R. 3:18(a): "All bills of particulars.., are pleadings."3 Subsequent to the demurrer, the parties stipulated that the transcript of the hearing.. insofar as . . . relevant . .. constitutes evidence . . . taken without objection and

available to . . . either party for any purpose before this court or upon appeal." Elderv. Holland, 208 Va. 15, 17, 155 S.E.2d 369, 371 (1967). The court held that the factsdisclosed by the transcript could be considered by it on appeal in ruling on the de-murrer, citing Smith v. Wolsiefer, 119 Va. 247, 250, 89 S.E. 115, 116 (1916), wherethe trial court's consideration of a deed of lease in ruling on a demurrer was upheldsince all the parties ". . . appear[ed] to have consented for the trial court to consider

[.. fit] as a part of the declaration." 208 Va. at 18, 155 S.E.2d at 372.The court also held that defendant's status as an employee of the state did not

render him immune from liability for his intentional acts done in the course of employ-ment.

4 Ginsberg v. Black, 192 F.2d 823 (7th Cir. 1951), cert. denied, 343 U.S. 934 (1952),reh. denied, 343 U.S. 958 (1952).

5Robertson v. Industrial Ins. Co., 75 So.2d 198, 45 A.L.R.2d 1292 (Fla. 1954);Ranier's Dairies v. Raritan Valley Farms, 19 N.J. 552, 117 A.2d 889 (1955).

6 "The [absolute] privilege extends [as well] to pleadings and other papers made a partof a judicial or quasi-judicial proceeding even though such proceeding is in its prelimi-nary stage and no formal judicial action has been taken." Ramstead v. Morgan, 219Ore. 383, 347 P.2d 594, 599 (1959); Reagan v. Guardian Life Ins. Co. of Texas, 155

202

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is neither judicial nor quasi-judicial, the statements made therein are usuallyheld entitled to a qualified privilege for defamation, i.e., privileged in theabsence of actual malice.7 The absolute privilege in judicial and quasi-judicial proceedings exists so long as the statement is relevant to the issueat hand.8 An absolute privilege is accorded such statements because it isfelt that the need for free discussion to reach a just result outweighs theattendant danger of defamation. 9 A "judicial proceeding" for the purposeof granting an absolute privilege for defamation is a hearing before a courtof established jurisdiction and procedure to decide the rights of parties beforeit.10 The term "quasi-judicial," and the concomitant absolute privilege forS.W.2d 950, 953 (Tex. Civ. App. 1941), aff'd, 140 Tex. 105, 166 S.W.2d 909 (1942)(written statement filed with insurance commissioner); RESTATEMENT, TORTS § 587,at 231 (1938); see Bartlett v. Christhilf, 69 Md. 219, 14 At. 518, 520 (1888) (petitionfiled with court asking that party be punished for contempt); cf. RESTATEMENT, TORTS,§ 586, at 229 (1938).

7 Story v. Norfolk Newspapers, Inc. 202 Va. 588, 590-91, 118 S.E.2d 668, 670 (1961):'TI]f a communication is one of qualified privilege the onus is cast upon the personclaiming to have been defamed to prove the existence of [actual] malice." NewYork Times Company v. Sullivan, 376 U.S. 254, 279-80 (1964), states that "actualmalice" is present when the statement is made with actual knowledge of its falsity orwith reckless disregard of whether it is false.

While the factors entitling the statement to a qualified privilege are often notspelled out, the decision to grant a qualified privilege is usually sustainable on at leastone ground, such as the fact that the statement: was made by a public officer in thedischarge of his official duty [City of Mullens v. Davidson, 133 W. Va. 557, 57 S.E.2d1, 6 (1949)]; concerned the official conduct of a public official, [New York Times Com-pany v. Sullivan, 376 U.S. 254 (1964); Reaves v. Foster, 200 So.2d 453, 456 (Miss.1967)]; was made to a group of persons sharing with the publisher a common interestin the subject matter [McKinnon v. Smith, 52 Misc. 2d 349, 275 N.Y.S. 2d 900 (1966);RESTATEMENT, TORTS § 596, at 255 (1938)]; was a comment on a matter of publicinterest [RESTATEMENT, TORTS § 596, at 260-61 (1938)]. See generally PROSSER, TORTS§ 110, at 805 (1964). See also Garrison v. Louisiana, 379 U.S. 64 (1964), which makesthe qualified privilege for comment in the press on the official conduct of a publicofficial, granted in New York Times Company v. Sullivan, supra, applicable to acriminal action for libel

8 Penick v. Ratcliffe, 149 Va. 618, 635, 140 S.E. 664, 669 (1927); Maulsby v. Reif-snider, 69 Md. 143, 14 Atl. 505, 506-07 (1888); Burgess v. Turtle and Co., 155 Minn.479, 193 N.W. 945, 947 (1923) suggests as a test of relevancy, "Was an allegationso palpably wanting in relation to the subject matter that no reasonable man coulddoubt its irrelevancy and impropriety?" See also Annot., 123 Am. St. Rep. 631, 649(1909), suggesting that the "privilege of a witness extends beyond that of counsel, forit is not his business to consider whether the subject under inquiry is relevant or not ...if no objection is made, or being made is overruled, it is the duty of the witness toassume it is relevant . . 6 and for his answer he cannot be held liable ... " ContraMatthis v. Kennedy, 67 N.W.2d 413, 417 (Minn Sup. Ct. 1954).

9 See Bartlett v. Christhilf, 69 Md. 219, 14 At. 518, 520 (1888); Ranier's Dairies v.Raritan Valley Farms, 19 N.J. 552, 117 A.2d 889, 891 (1955); Matthis v. Kennedy,67 N.W.2d 413, 417 (Minn. 1954).

10 Penick v. Ratcliffe, 149 Va. 618, 628, 140 S.E. 664, 667 (1927).

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defamation, applies to those administrative and regulatory proceedings whichshare with judicial proceedings safeguards tending to inhibit the makingof defamatory statements." One such safeguard is the mandatory require-ment of attendance by witnessesa2 which aids in a thorough investigationof the issues involved and enables the defamed party to face his accusers,permitting him to vindicate himself in the same proceeding.13 The presenceof criminal liability for perjured testimony14 and the amenability of the

11 Engelmohr v. Bache, 66 Wash.2d 103, 401 P.2d 346, 347 (1965) (by implication);Ranier's Dairies v. Raritan Valley Farms, 19 N.J. 552, 117 A.2d 889, 894 (1955). Butsee J. D. Construction Corp. v. Isaacs, 95 N.J. Super. Ct. 122, 230 A.2d 168 (1967), cert.granted, 50 N.J. 290, 234 A.2d 399 (1967), an action for slander and libel arising outof the contents of a letter sent by defendant to members of a township committeecharging plaintiff with improper conduct in connection with an application for a zoningchange. At a meeting of the township committee the letter was read aloud with de-fendant's permission and thus made part of the proceedings. On appeal, the plaintiffobjected to the granting of an absolute privilege for defamation to the letter's contentson the ground that the meeting had lacked judicial safeguards. Stating that defendanthad "read too much" into the requirement of Ranier's Dairies v. Raritan Valley Farms,supra, that a quasi-judicial proceeding must contain judicial safeguards, the court foundthe hearing quasi-judicial for the following reasons: defendant could be regarded as a"party," i.e., a participant, in the proceeding, since it was "appropraite" to have givenhim notice and hearing, even though these were not in fact given him; a presidingofficer was in control of the meeting (nothing, however, is said regarding his powers overthe proceeding's participants) ; the decision was reviewable both on its law and facts by acourt; the subject matter of the hearing was quasi-judicial and of "substantial publicimportance." The court prefaced its decision with the observation that the border separat-ing quasi-judicial proceedings from other proceedings is a "penumbral" one. Should theNew Jersey Supreme Court sustain the lower court's decision, however, there will haveemerged a clear line dividing those jurisdictions which demand for a quasi-judicial pro-ceeding the presence of some safeguards mitigating the danger of defamation from thosewhich are satisfied with the presence of other quasi-judicial features.

In Corbin v. Washington Fire and Marine Insurance Company, 278 F. Supp. 393(D.C.S.C. 1968), the court granted defendant's motion for summary judgment on theground that its statement of facts in a private arbitration proceeding had been absolutelyprivileged for libel. Noting the strong public policy in favor of settling disputes bymeans of arbitration, the court stated that were such statements not so privileged, theensuing fear of defamation actions could hamper the development of a full recordwhich is necessary for effective arbitration. The court dismissed as unimportant thefact that the arbitration proceeding had come about by private agreement rather thanunder statute. Moreover, the absence of a hearing officer with supervisory power overthe proceedings would not negate the privilege, since even in a judicial proceeding thescope of the privilege may extend beyond the court's power to restrain the participants.

12 Guardian Life Ins. Co. of Texas v. Reagan, 155 S.W.2d 950, 953 (Tex. Civ. App.1941), aff'd, 140 Tex. 105, 166 S.W.2d 909 (1942); Jenson v. Olson, 141 N.W.2d 488,490 (Minn. Sup. Ct. 1966). See RESTATEMENT, TORTS § 588, comment a at 233 (1938),"The compulsory attendance of witnesses makes the protection afforded the morenecessary." Veeder, Absolute Immunity in Defamation: Judicial Proceedings, 9 COLUM.L. REv. 463, 486 (1909).

13 Veeder, supra note at 486.14See Bartlett v. Christhilf, 69 Md. 219, 14 Atl. 518, 520 (1888); RESTATEMENT,

RECENT DECISIONS

participants of the proceeding to contempt process 5 are other highly re-garded safeguards which tend to keep statements within tolerable boundswithout unduly restricting free discussion.' 6 Another factor indicating thata hearing is quasi-judicial is the availability to a defamed party of analternative remedy to an action for defamation.' 7 While malicious prosecu-tion has been suggested as an alternative remedy,'8 not all jurisdictions permitthis action in response to every wrongfully instituted civil proceeding. 19

Also, it does not lie where the defendant can show probable cause forinitiating the proceeding, even though his subsequent testimony is deliber-ately slanderous.2 Moreover, the availability of an action for maliciousprosecution presupposes both that the defaming party helped initiate orencouraged the proceeding and that the party defamed therein was alsothe defendant.2'

TORTS § 588, comment a at 233 (1938) ("The witness is subject to the control of thetrial judge in the exercise of the [absolute] privilege. For the abuse of it, he may besubject to criminal prosecution for perjury and to punishment for contempt.") cited inJenson v. Olsen, 141 N.W.2d 488, 490 n.3 (Minn. Sup. Ct. 1966); Veeder, supra note 12,at 470.

15See Mills v. Denny, 245 Iowa 584, 63 N.W.2d 222, 225 (1954); RESTATEIENT,TORTS § 588, comment a at 233 (1938). But see Ranier's Dairies v. Raritan ValleyFarms, 19 N.J. 552, 117 A.2d 889, 894 (1955).

16 Veeder, supra note 12, at 470.17 Mills v. Denny, 245 Iowa 584, 63 N.W.2d 222, 225 (1954); Veeder, supra note 12,

at 470. See also Harper, Malicious Prosecution, False Imprisonment and Defamation, 15Tx. L. REv. 157 (1937).

18 Ranier's Dairies v. Raritan Valley Farms, 19 N.J. 552, 117 A.2d 889, 896 (1955).See also Novick v. Becker, 4 Wis. 2d 432, 90 N.W.2d 620 (1958). In Bartlett v.Christhilf, 69 Md. 219, 14 Adt. 518, 520 (1888), defendant's petition filed with courtwas absolutely privileged as a statement made in the course of a judicial proceedingand abuse of process was not available as an alternative remedy, regardless of the pe-titioner's malice and knowledge of the falsity of its averments, since the petition wasfiled for the very purpose for which such petition was intended to be used.

19 12 MICHIE'S JURISPRUDENCE, Malicious Prosecution § 15, at 319 (1950); "[The]groundless and malicious institution of even civil suits will furnish a basis of action whereit is accompanied by arrest of the person, seizure of property, injury to business, orother special damage.", citing National Surety Co. v. Page, 58 F.2d 145 (4th Cir. 1932),reh. denied 59 F.2d 370 (1932). See also Petrich v. McDonald, 44 Wash.2d 211, 266P.2d 1047, 1050, 1052 (1954) holding plaintiff could not recover in action for maliciousprosecution when he failed to show "special injury" (also called "special damage")which the court said did not include any injury which is the "necessary result of allsimilar suits."

20See PROSSER, TORTS § 113, at 852-53 & § 114, at 874 (1964).21 See, PROSSER, TORTS § 113, at 854-55 (1964). See also Taplin-Rice-Clerkin Co. v.

Hower, 124 Ohio 123, 177 N.E. 203, 81 A.L.R. 1117 (1931) (testimony given beforea grand jury absolutely privileged and inadmissible in a subsequent action for maliciousprosecution).

In Ranier's Dairies v. Raritan Valley Farms, 19 N.J. 552, 117 A.2d 889, 895 (1955),

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In addition to the foregoing tests courts have asked whether the proceed-ing dealt with issues of significant public concern, but the presence ofsuch issues, without more, has not led them to find statements of its partici-pants absolutely privileged.2 2 However, proceedings aimed at determiningwhether a party's license to engage in certain activity should be granted,suspended, or revoked have often been held to be of a quasi-judicialnature. 23 The fact that a proceeding is conducted pursuant to statutoryprovisions is often a significant factor, though not a decisive one.24 Proceed-ings from which a party may appeal of right to a court of law havegenerally been held to be quasi-judicial.'

Prior to Elder, in Lightner v. Osborn,26 plaintiff in a libel action hadsought to introduce defendant's testimony offered in a previous judicialproceeding as evidence of his malice in making accusations in a letter whosecontents were covered by a qualified privilege. Holding the testimony fromthe previous trial admissible, the court said defendant's privilege as awitness had been a "limited" one 7 However, since the court found thethe court recognized approvingly that malicious prosecution is a more limited remedythan slander or libel stating, "If the policy, which in defamation actions affords anabsolute privilege or immunity to statements made in judicial and quasi-judicial proceed-ings is really to mean anything then we must not permit its circumvention by affordingan almost equally unrestricted action under a different label."

22 Compare Ranier's Dairies v. Raritan Valley Farms, 19 N.J. 552, 117 A.2d 889,894 (1955); Lininger v. Knight, 123 Colo. 213, 226 P.2d 809, 813 (1951), with Engel-mohr v. Bache, 66 Wash. 103, 401 P.2d 346 (1965); cf. Posnett v. Marble, 62 Vt. 481,20 Atl. 813, 815 (1890); RESTATEMENT, TORTS § 598, at 260 (1938).

23Robertson v. Industrial Ins. Co., 75 So.2d 198, 45 A.L.R.2d 1292 (Fla. 1954);Powers v. Vaughan, 312 Mich. 297, 20 N.W 2d 196 (1945); Ranier's Dairies v. RaritanValley Farms, 19 N.J. 552, 117 A.2d 889 (1955); Guardian Life Ins. Co. of Texasv. Reagan, 155 S.W.2d 950, 953 (Tex. Civ. App. 1941), aff'd, 140 Tex. 105, 166 S.W.2d909 (1942). But see Engelmohr v Bache, 66 Wash. 103, 401 P.2d 346 (1965); Meyerv. Parr, 69 Ohio App. 344, 37 N.E.2d 637 (1941).

24 Compare Penick v. Ratcliffe, 149 Va. 618, 631, 140 S.E. 664, 668 (1927); Burgess v.Turtle and Co., 155 Minn. 479, 193 N.W. 945, 947 (1923), with Engelmohr v. Bache,66 Wash. 103, 401 P.2d 346 (1965), petition for cert. dismissed, 382 U.S. 950 (1965).But see Meyer v. Parr, 69 Ohio App. 344, 37 N.E.2d 637 (1941).

25J. D. Construction Corp. v. Isaacs, 95 N.J. Super. Ct. 122, 230 A.2d 168, 172(1967), cert. granted, 50 N.J. 290, 234 A.2d 399 (1967); Guardian Life Ins. Co. ofTexas v. Reagan, 155 S.W.2d 950, 953 (Tex. Civ. App. 1941), aff'd, 140 Tex. 105,100 S.W.2d 909 (1942); cf. Veeder, supra note 12, at 486. Contra, Meyer v.Parr, 69 Ohio App. 344, 37 N.E.2d 637, 640 (1941), where the court denied an absoluteprivilege for defamation to an affidavit filed with the state board of embalmers. Thecourt stated that the provision for judicial review of contested cases in the statute creat-ing the board did not mean that the board exercised "judicial power." Rather this pro-vision was said to be a recognition that "under the due process clauses of the stateand federal constitutions it is not possible to confer absolute power upon executive oradministrative officers."

26 142 Va. 19, 127 S.E. 314 (1925).2 7 Id. at 24, 127 S.E. at 316.

RECENT DECISIONS

testimony to have been irrelevant to the issues at the earlier hearingwherein it was given, its holding was consistent with the existence of anabsolute privilege. 28 In the later case of Penick v. Ratcliffe, a petition filedin a circuit court charging election irregularities formed the basis for a libelaction. Stating that the definition of a judicial proceeding was "broad andcomprehensive," the court held that, while the hearing was neither a suitin equity nor an action at law, the petition's allegations were entitled toan absolute privilege. 29 The Elder case presented for the first time in Virginiathe issue of whether to grant the absolute privilege to testimony in an ad-ministrative hearing, and the court applied the criteria heretofore notedin reaching its decision. The court stressed its uncertainty about whetherfalse testimony by any witness in the hearing could have made the lattercriminally liable for perjury.3 ° This uncertainty is justified in view ofCommonwealth v. Calvert where the quashing of an indictment for perjurywas upheld because the particular court did not have "legal and competentauthority" to administer the oath in question. 3' Assuming, arguendo, thatdefendant's testimony at the superintendent's hearing was false, it is stillquestionable whether it was material as required by the Virginia statutedefining perjury.32

The Elder court noted that attendance at the hearing had not beenmandatory and that the declarant, whose statement defendant claimed to berepeating, had declined to attend.3 3 Also noting that the rules of evidencehad not been applied and that defendant's allegedly slanderous statementwas hearsay,3 the court contrasted the hearing with those held under theGeneral Administrative Agencies Act.35 In the latter hearings, witnessescan be subpoenaed and hearsay testimony received only when a declarantis not readily available as a witness and when judicial review is afforded.3 6

The court, however, expressly withheld opinion about whether a witness' tes-timony in a hearing pursuant to this act would qualify for an absoluteprivilege3 7 Calling attention to the hearsay nature of defendant's statementserved to dramatize the greater likelihood of defamatory statements oc-

28 Cases cited note 9 supra.28 Cases cited note 9, supra.30 208 Va. at 22, 155 S.E.2d at 374.313 Va. (1 Va. Cas.) 265, 267 (1809).3 2 VA. CODE ANN. § 18.1-273 (1960). See Commonwealth v. Crump, 75 Va. 922

(1822).33 208 Va. at 16, 155 S.E.2d at 374.341 d. at 22, 155 S.E.2d at 374.35 VA. COD, ANN. §§ 9-6.1 to -6.14 (1964).36VA. CODnANN. §§ 9-6.10, 9-6.11 & 9-6.13 (1964).37 208 Va. at 22 n. 3, 155 S.E.2d at 374 n. 3.

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curring in proceedings where the rules of evidence are not applied. Doubt-less, the court did not mean to suggest that a witness' testimony ceases tobe absolutely privileged when it transgresses so technical an evidence rule,since this would inhibit the flow of free discussion which the absolute privi-lege seeks to encourage.

In Allen v. Crofoot, a New York court held that slanderous testimony isabsolutely privileged even though not given in a judicial proceeding pro-vided the defaming party reasonably believes such a proceeding is in prog-ress.3 8 Similarly, conceding that the hearing involved in Elder was not quasi-judicial, there remains the issue of whether the defendant was justified inbelieving it to be such in view of its ostensible features: plaintiff was repre-sented at the hearing by counsel; an Assistant Attorney-General representedthe Commonwealth's interests ;39 all testimony was given under oath, trans-cribed by a court reporter,4° and subject to cross-examination. 41 In dictumthe Penick court had noted sympathetically that "witnesses who detail theirown version of facts seldom pause to ponder the jurisdiction of the court," 42but the Elder court apparently viewed the issue as mooted here by thepresiding officer's warning at the outset of the proceeding that it was "nota hearing before a Court of law." 43

Discrimination-HosPITALS-ANY SEGREGATION OF PATIENTS BY RACEWITHIN WARDS OF A PUBLICLY SUPPORTED HOSPITAL Is A PATENT

VIOLATION OF THE LAW.-QUALIFIED NEGRO PHYSICIANS SHALL NOT

BE DENIED STAFF PRIVILEGES AT A PUBLICLY SUPPORTED HOSPITAL

BECAUSE OF THEIR RACE. Cypress v. Newport News General and Non-sectarian Hospital Association, 375 F. 2d 648 (4th Cir. 1967).

A Negro physician's application for staff privileges at defendant hospitalwas rejected by a secret ballot vote of the all-white staff, although hewas ostensibly well qualified. The hospital, which received substantial fed-

38 2 Wend. (N.Y.) 515, 20 Am. Dec. 647 (1829); see Harper, Privileged Defamation,22 VA. L. Rav. 642, 649-50 (1936):

In practically all cases of privilege in the law of torts the existence of a privilegedepends upon facts as they appear to the person whose liability is in question....In the law of defamation it would be extraordinary if the facts as they reasonablyappeared to the defendant would not beget the privilege.

39 Elder v. Holland, 208 Va. 15, 16, 155 S.E.2d 370-71 (1967).40 Ibid.41 Record, Vol. 208, Elder v. Holland, 208 Va. 15, 155 S.E.2d 369 (1967)42 Penick v. Ratcliffe, 149 Va. 618, 631, 140 S.E. 664, 668 (1927).43 Elder v. Holland, 208 Va. 15, 22, 155 S.E.2d 369, 374 (1967).

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eral and state aid under the Hill-Burton Act,1 also segregated patientswithin its wards and rooms by race. The physician and two of his patientsbrought a class action to enjoin the racially discriminatory policies andpractices of the defendant hospital in Newport News, Virginia; specifically:(1) from segregating races within individual wards and rooms, and (2)from denying staff privileges to qualified Negro physicians. The districtcourt denied relief 2 On appeal, held, reversed and remanded for the entryof an order of injunctive relief. Segregation of the races within wards ofpublicly supported hospitals is unconstitutional, moreover, qualified Negrophysicians shall not be denied staff privileges at a publicly supported hospitalbecause of their race.3

Since the decision of the United States Supreme Court in Brown v. Boardof Education,4 courts have held compulsory segregation of the races ina variety of situations to be a violation of the rights guaranteed by theFifth and Fourteenth Amendments.5 Hospitals which receive substantial

1 60 Stat. 1041 (1946), as amended, 42 U.S.C. § 291 (1964). Grants are made bythe federal government to public and private hospitals to assist in the constructionof new hospital facilities. These grants are made in accordance with a statewide plansubmitted by an authorized state agency after it has made an inventory of existingneeds and developed construction priorities according to federal standards. In severalprevious cases, a hospital's participation in the Hill-Burton federal-state aid programhas been held to bring it within the purview of the Fifth and Fourteenth Amendments'prohibition against racial discrimination. Eaton v. Grubbs, 329 F.2d 710 (4th Cir.1964); Simkins v. Moses H. Cone Mem. Hosp., 323 F.2d 959 (4th Cir. 1963); Greismanv. Newcomb Hosp., 40 N.J. 389, 192 A.2d 817 (1963)

2 Cypress v. Newport News Gen. and Nonsectarian Hosp. Ass'n, 251 F. Supp. 667(E.D. Va. 1966).

3 The court, per Sobeloff, J., held that, since the hospital had not given a reasonableexplanatiop showing that the denial of staff privileges was not based on the race of theapplicant, that an inference of racial discrimination had not been rebutted. The infer-ence was compelled by the fact that seventy per cent of the white physicians in thecommunity were members of the hospital staff (a prerequisite for admitting theirpatients), while none of the Negro physicians were. Cypress follows a line of recentcases holding likewise. Chambers v. Hendersonville City Bd. of Educ., 364 F.2d 189(4th Cir. 1966) (School teachers who were dismissed without explanation showed thatthey had all the objective qualifications. The burden of proof was then on the schoolboard to produce evidence meriting dismissal.); Hawkins v. North Carolina DentalSoc'y, 355 F.2d 718 (4th Cir. 1966), noted in 65 MIcH. L. REv. 549 (1967) (Wheretwo doctors on an all-white staff of the dental society had to recommend new mem-bers, Negro applicants were unduly burdened, but not white applicants.); see Note,Racial Integration of Professional Associations, 18 U. FLA. L. REv. 490 (1965); andNote, Working Rules For Assuring Nondiscrimination In Hospital Administration, 74YALE L. J. 151 (1964).

4347 U.S. 483 (1954).5 Loving v. Virginia, 388 U.S. 1 (1967) (anti-miscegenation statutes); Reitman v.

Mulkey, 387 U.S. 369 (1967) (housing); Watson v. City of Memphis, 373 U.S. 526(1963) (public parks and playgrounds); Boynton v. Virginia, 364 U.S. 454 (1960)

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federal or state aid have previously been held to come within the purviewof the Fifth or Fourteenth Amendment's guarantees of due process andequal protection of the laws. 6 Most previous decisions have dealt withsegregation in "hospital facilities" offered to patients seeking admission.7These decisions have uniformly held that patients of both races must beadmitted without racial discrimination to hospitals which are publicly sup-ported. The principal case concerns another problem, namely, the patient'srights after admission to the hospital. More precisely, the question iswhether one's constitutional rights have been violated if, after being admittedto a racially integrated hospital, he is placed in a ward exclusively withmembers of his own race. Cypress holds that this is unconstitutional racialdiscrimination per se. Yet a hospital patient has another possibly conflictingright-that of a reasonable degree of care from his physician and thehospital in providing for his recovery; specifically, in providing surroundingconditions which promote the equanimity necessary for convalescence andrecovery. 8

Only two cases other than Cypress have dealt specifically with the narrowissue of discrimination within individual wards after admission to the hos-pital. In Rackley v. Board of Trustees of the Orangeburg Regional Hos-pital,9 the Court conceded that "psychological factors are an importantelement in patient recovery," 10 but added, nevertheless, that "[r]acial classi-fications are irrelevant and invidious." " The court also said that "[jiustifi-cation to segregate on the basis of alleged . . . 'differences' is no longer(seating in courtrooms); United States v. Jefferson County Bd. of Educ., 372 F.2d836 (5th Cir. 1966) (collecting cases on school desegregation).

6 Eaton v. Grubbs, 329 F.2d 710 (4th Cir. 1964); Simkins v. Moses H. Cone Mem.Hosp., 323 F.2d 959 (4th Cir. 1963); Greisman v. Newcomb Hosp., 40 N.J. 389, 192A.2d 817 (1963).

7 Flagler Hosp., Inc. v. Hayling, 344 F.2d 950 (5th Cir. 1965); Lewter v. Lee Mem.Hosp. No. 65-47-Civ. T. (M.D. Fla. 1965), 11 RAcE REL. L. REP. 1425; Eaton vGrubbs, 329 F.2d 710 (4th Cir. 1964); Simkins v. Moses H. Cone Mem. Hosp., 323 F.2d959 (4th Cir. 1963); Meltsner, Equality and Health, 115 U. PA. L. Rnv. 22, 28 (1966).

8 Cf. McCoid, The Care Required of Medical Practitioners, 12 VAND. L. R.v. 549(1959); Note, Hospital Tort Liability and Immunity, 49 VA. L. Rv. 622 (1963).

9 238 F. Supp. 512 (E.D.S.C. 1965), 10 RACE REL. L. REP. 297.lId. at 518, 10 RAcE REL. L. REP. at 302, citing Brown v. Board of Educ., 347

U.S. 483 (1954).11 Id. at 519, 10 RACE REL. L. REP. at 302. This unbending principle of law was

first used in a 1944 case involving a labor contract and the phrase actually used was,"Here the discriminations based on race alone are obviously irrelevant and invidious."(Emphasis added.) Steele v. Louisville and Nashville Ry. Co., 323 U.S. 192, 203 (1944).This phrase, although frequently misapplied, became extremely popular after the Steeledecision. It has since been used in at least two school cases, Goss v. Board of Educ., 373U.S. 683, 687 (1963), and Randall v. Sumter School Dist. No. 2, 232 F. Supp. 786,789 (E.D.S.C. 1964). Rackley quoted the phrase, citing Randall as its source.

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permissible; the issue is no longer litigable."'2 (Emphasis added.) Althoughit is debatable whether school desegregation cases are in point,13 the Courtrelied on many of them in enjoining the defendant hospital from maintainingracially segregated wards.

In Cypress, Judge Bryan dissented in part,'4 stating that a doctor's pro-fessional obligation to provide for a patient's recovery should be allowedto override the general policy of integration in certain cases. Where integra-tion of the races within a hospital room would be injurious to the conditionof either a white or a Negro patient because of actual although unfoundedprejudice, a physician, using his professional discretion, should be allowedto place the patient in a room with members of his own race.

The other case on discrimination within wards after admission to thehospital lends support to Judge Bryan's view. In Rax v. State Departmentof Hospitals,15 the Court ordered the defendant hospital to cease anddesist from maintaining segregation of the races in any part of the hospital,including wards. The Court went one step further and added:

[Nothing herein contained shall operate to or be construed as prohibitingthe re-assignment of any patient, following such patient's admission ...on an individual case basis, to a different ward, room, or residential area,where such re-assignment is made by the patient's physician or physiciansbased solely upon therapeutic, medical or psychiatric considerations andevaluations in the best interest of the patient.16

In the principal case it was said that a hospital has practiced unconsti-tutional racial discrimination per se if it places Negro patients in one ward

121d. at 519, quoting Goss v. Board of Educ., 373 U.S. 683, 687 (1963).13 The Supreme Court said in Brown v. Board of Educ., 347 U.S. 483, that separateeducational facilities were inherently unequal. Separate schools cannot have the sameteachers or even equal teachers, but hospital wards can have the same nurses and doctors.Furthermore, students racially segregated in schools are denied the opportunity of com-munication and association, an integral element of education guaranteed by theConstitution. Patients in hospitals, on the other hand, seemingly could receivetreatment or convalesce equally well without communication or discussion among them-selves. Education is a process of interaction, whereas patient treatment is administeredto individuals, not en masse. Therefore, there may be a denial of a necessary elementin education where schools are racially segregated but a denial of no element of treat-ment where hospital wards are segregated in a racially integrated hospital. Thus, caseswhich deal with constitutional rights in schools may not be applicable to controversieswhich arise in facilities operated for other purposes. C. Nichols v. McGhee,169 F. Supp. 721, 724 (N.D. Cal.), appeal dismissed, 361 U.S. 6 (1959).

14 Cypress v. Newport News Gen. and Nonsectarian Hosp. Ass'n, 375 F.2d 648, 661(1967).

15 Civ. Action No. 3265 (E.D. La. 1965), 11 RAcE REL. L. REP. 384.16 Id. at 385.

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212 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 3:202

and white patients in another. In addition, relying on a recent Alabamacase holding the segregation of prisoners unconstitutional, 17 Judge Sobeloff,writing for the majority, states:

Any distinction made on the basis of race in a publicly supported insti-tution is a patent violation of the law, not to be tolerated by a courtthat is controlled by the Constitution of the United States.18

He then concludes that, if the Constitution will not tolerate racial seg-regation of prisoners, then it would more emphatically deny segregationof patients in a publicly supported hospital. 19 Prison cases should bemore persuasive in hospital litigation than school cases are. The purposesof the two former institutions are somewhat similar, one being to providefor recovery, the other for rehabilitation. As in hospital cases, the prisoncases hold that arbitrary racial discrimination is unconstitutional.20 Mostof these cases concede, however, that racial segregation in prisons is neces-sary and not forbidden by the Constitution under certain circumstances,namely, when necessitated to insure security and discipline.2 By analogousreasoning, the Rax decision 22 and Judge Bryan's dissent23 conclude thatthere are exceptions to constitutional guarantees in hospitals also.

17 Washington v. Lee, 263 F. Supp. 327 (M.D. Ala. 1966), aff'd, 390 U.S. 333 (1968).18 Cypress v. Newport News Gen. and Nonsectarian Hosp. Ass'n, 375 F.2d 648, 656

(4th Cir. 1967).19 Ibid. n. 15.20Toles v. Katzenbach, 385 F.2d 107 (9th Cir. 1967); Board of Managers of the

Ark. Training School for Boys v. George, 377 F.2d 228 (8th Cir. 1967); Washingtonv. Lee, 263 F. Supp. 327 (M.D. Ala. 1966), aff'd, 390 U.S. 333 (1968); Nichols v.McGhee, 169 F. Supp. 721 (N.D. Cal. 1959), appeal dismissed, 361 U.S. 6 (1959); seeComment, The Rights of a Prisoner While Incarcerated, 15 Buffalo L. Rev. 397 (1965).

21 Lee v. Washington, 390 U.S. 333 (1968), aff'g 263 F. Supp. 327 (M.D. Ala.1966). In a per curiam opinion, the Court stated that it found the district court'sopinion "unexceptionable." The district court opinion upon which the court relied inCypress conceded that "there was merit in the contention that in some isolated instancesprison security and discipline necessitates segregation of the races for a limited period."A separate concurring opinion by Justices Black, Harland, and Stewart stated that"prison authorities have the right, acting in good faith and in particularized circum-stances, to take into account racial tensions in maintaining security, discipline, and goodorder in prisons and jails." Accord, Toles v. Katzenbach, 385 F.2d 107, 109 (1967);Board of Managers of the Ark. Training School for Boys v. George, 377 F.2d 228, 232(8th Cir. 1967); Nichols v. McGhee, 169 F. Supp. 721, 725 (N.D. Cal. 1959), appealdismissed, 361 U.S. 6 (1959); see Comment, The Rights of a Prisoner While In-carcerated, 15 BUFFALO L. Rxv. 397, 417 (1965).

22Rax v. State Dept. of Hosp., Civ. Action No. 3265 (E.D. La. 1965), 11 RAcF REL.

L. REP. 384.23 Cypress v. Newport News Gen. and Nonsectarian Hosp. Ass'n, 375 F.2d 648, 661

(4th Cir. 1967).

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The majority of the cases in the field of prisons and some of those involv-ing hospitals seem to be developing a doctrine reminiscent of Justice Holmes'"clear and present danger" test applied in a different context. Thus, theapplication of the Court's stringent interpretation of the Constitution in theprincipal case is apparently not in accord with the weight of authority.

Municipal Corporations-STAmNG TO SuE-RIGHT OF LOCAL TAX-PAYERS TO CHALLENGE EXPENDITURES OF PUBLIC FuNDs. Gordon v.Board of Supervisors, 207 Va. 827, 153 S.E. 2d 270 (1967).

Plaintiffs filed a bill of complaint in a declaratory judgment proceeding,on behalf of themselves and all other taxpayers similarly situated, to chal-lenge the statutory power of the Board of Supervisors' to lend money tothe Fairfax County Airport Authority.2 The trial court dismissed plaintiffs'complaint and they appealed. On appeal, the Board challenged plaintiffs'standing to appeal. Held, taxpayers not only have standing to challenge anexpenditure of public funds by a locality,3 but also have standing to appeal.4

Although taxpayers do not presently have standing to challenge theexpenditure of funds by the federal government,5 they can challenge state

24 Schenck v. United States, 249 U.S. 47, 52 (1918).

1 Va. Acts of Assembly 1964, ch. 642, at 967-75.2 This Authority was created by the Fairfax County Board of Supervisors under power

vested in it by the Act, supra note 1, with the purpose of planning, financing, and ac-quiring property for an airport. The Gordons and other landowners were enjoined ina prior suit from obstructing Authority representatives who desired to make tests ontheir lands. The Gordons unsuccessfully maintained that the Authority could not com-pensate them for any damages caused by the tests. Although the Gordons had an indi-vidual economic interest as landowners in the prior suit, and they mentioned this interestin seeking standing to appeal in the present appeal, the Supreme Court of Appealsappraised appellants' standing as a taxpayer and not as a landowner. It was upon thistaxpayer interest that they were granted standing to appeal.

3 Surveys of taxpayer suits note no difference between suits against counties andmunicipal corporations (both hereinafter referred to as "locality"). See Comment,Taxpayers' Suits: A Survey and Summary, 69 YALE L. REv. 895, 896 n. 7 (1960); Note,Taxpayer's Suits as a Means of Controlling the Expenditure of Public Funds, 50 HARv.L. REV. 1276 n. 5 (1937). No distinction can be found in Virginia.

4Tle Court also held that 1) the prior injunction suit by the Authority was not resjudicata as to whether the Board had authority to lend the Authority money; 2) Va.Acts of Assembly 1966, ch. 132, at 231, which allows a local government to lend moneyto any Authority it created, did not retroactively cure the Board's inability to loanmoney under the 1964 Act, supra note 1; 3) although the Board did not have expresspower to lend, such power would be inferred from the 1964 Act, for without it theAuthority would be ineffective.

5 Frothingham v. Mellon, 262 U.S. 447 (1923). A federal taxpayer, because of hisremote economic interest, does not have standing to challenge federal expenditures

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expenditures in at least thirty-four states,6 and local expenditures in almost

which would increase the burden of future taxation and thereby take his property withoutdue process of law. But see United States v. Butler, 297 U.S. 1 (1936), and CincinnatiSoap Co. v. United States, 301 U.S. 308 (1937), where earmarking of the proceeds of aparticular tax was said to establish a basis in a taxpayer's suit for judicial review of thevalidity of that particular expenditure. Authorities have criticized Frothingham. See, e.g.,Davis, Standing to Challenge Governmental Action, 39 MINN. L. REv. 353, 387-91 (1955) ;Jaffee, Standing to Secure Judicial Review: Public Actions, 74 HARV. L. Rav. 1265,1294 (1961). In Flast v. Gardner, 271 F. Supp. 1, (S.D.N.Y. 1967), petition for appealfiled, 36 U.S. L. WEEK 3061 (U.S. July 25, 1967) (No. 416), taxpayers who are con-testing federal expenditures as violative of the Establishment Clause attack the Froth-ingham standing requirements. Professor Lewis in Constitutional Rights and the Misuseof "Standing," 14 STAN. L. REv., 433, 436-41 (1962), suggests that federal taxpayersmight establish standing to obtain judicial review of federal expenditures by proving anactual invasion of a constitutionally protected interest. Such a method of establishingstanding might circumvent the Frothingham standing requirements which ProfessorSutherland finds modified by the impact of Engel v. Vitale, 370 U.S. 421 (1962).Sutherland, Establishment According to Engel, 76 HARV. L. REv. 25, 26 (1962).

6 Comment, 69 YALE L. REv., supra note 3, at 895 n. 6. Although Virginia taxpayershave not been granted express standing to challenge state actions, several decisions indicatethat such standing might exist. A joint suit may be brought by two or more partiesof a class for the benefit of all those similarly situated. Bull v. Read, 54 Va. (13 Gratt.)78 (1855). A suit against a state officer is not necessarily a suit against the state.Blanton v. Southern Fertilizing Co., 77 Va. (2 Hans.) 335 (1883). When a Virginiacorporation sought to enjoin state officials on behalf of all other Virginia taxpayers fromacting under a statute, the question of standing to sue was not raised. Shenandoah LimeCo. v. Governor, 115 Va. 865, 80 S.E. 753 (1914). The Supreme Court of Appeals hasallowed a Virginia county, as representative of milk consuming inhabitants to challengean order of the State Milk Commission, in an unreported per curiam decision filedJanuary 26, 1953, aff'd per curiam, 346 U.S. 932 (1954), discussed in Note, The SupremeCourt, 1953 Term, 68 HARv. L. REV. 96, 132 (1954).

These cases form a foundation upon which a taxpayer's standing to challenge mis-appropriation of state funds could be based. This standing could be created in severalways: 1) allow taxpayers in a class action to challenge state expenditures; 2) alternatively,if taxpayers themselves are not given standing, allow local governments to challengeexpenditures on their behalf; 3) establish that taxpayer suits are not directed against thestate itself, but against state officials who misuse funds, thus avoiding the immunityproblem. State immunity from suits which are instituted without express consent of thestate should not extend to suits against individuals who illegally invade or threatento invade pecuniary or property rights of taxpayers, even though they purport to actunder state authority. E.g., Terr v. Jordon, 232 N.C. 48, 59 S.E.2d 359 (1950). Theneed for taxpayer suits as a means to remedy illegal action by state officials continuesdue to the failure of the election process, public prosecution, and public exposure toprovide a satisfactory substitute.

True, the taxpayer's contribution to the state treasury may be a lesser percentageof the total than his municipal tax payments, and his interest in state affairs mighttherefore be said to be more remote. But no overriding considerations-such asthe need for executive flexibility on the national level in foreign affairs and de-fense-make review of state action less desirable than review of the affairs of localgovernment.

69 YALE L. REv. at 902.

RECENT DECISIONS

every jurisdiction.7 A Virginia taxpayer, who has suffered no out-of-pocketloss, may sue on behalf of a locality to recover funds which have beenmisappropriated by an individual public official, subject to the requirementthat he first request the locality to sue and that it refused, or allege factsto show that such a request would be unavailing8 Local taxpayers withoutspecial interest do not have standing in equity to challenge land assessmentreports in condemnation proceedings, 9 remove tie breakers from county boardof supervisors, 10 or challenge the selection of school sites." In such suits,taxpayers lack standing because of insufficient injury from the challengedact.12 However, taxpayers do have standing to enjoin a locality itselffrom making unauthorized appropriations of local funds,13 or illegal disposi-tions of local property. 14 But they could not appeal if the only wrong

7 Crampton v. Zabriskie, 101 U.S. 601 (1879). For a collection of cases and jurisdic-tional holdings, see Comment, 69 YALE; L. REv. supra note 3, at 895 n.7. See also 4 DIL-LON, MUNICIPAL CORPORATIONS § 1579-91 at 2763-91 (5th ed. 1911) [hereinafter citedas DILLON]; 2 ANTIEAu, LOCAL GOVERNMENT LAWv § 16.16-17, at 503-14 (1967) (tax-payer suits against municipal corporations) [hereinafter cited as ANTiEAU]; 4 ANTIEAU§ 40.07, at 254-57 (taxpayer suits against counties); RHYME, MUNICIPAL LAw § 31-3, at792-94 (1967); 18 MCQUILLIN, MUNICIPAL CORPORATIONS § 52.02 (3rd ed. 1950);Jaffee, supra note 5, at 1265.

8 Sauer v. Moore, 171 Va. 421, 199 S.E. 487 (1938), discussed in 2 ANTIEAU § 16.14at 496 & n. 46.

9 Culpeper v. Gorrell, 61 Va. (20 Gratt.) 484 (1871).10 Nicholas v. Lawrence, 161 Va. 589, 171 S.E. 673 (1933).11 Brown v. Baldwin, 112 Va. 536, 72 S.E. 143 (1911).12 The interest required for Virginia taxpayer standing today is the product of stand-

ards demanding an economic injury produced by the misuse of public funds. The partieswho sued in cases cited in notes 9, 10, and 11, supra, lacked this interest. There hasbeen no recent litigation to allow the Supreme Court of Appeals to reappraise theinterest required for taxpayer standing. The current trend in other jurisdictions, how-ever, is to recognize that a taxpayer has an interest in good government, and thatcourts should protect this interest by judicial review of local actions without a showingof substantial impact on interests personal to the taxpayers. Note, City Government inthe State Courts, 78 HARv. L. REv. 1596 (1965). In recognizing this trend, Gordonmight indicate a relaxation of requirements for taxpayer standing which would expandthe field of illegal local actions which taxpayers can challenge.

13 Bull v. Read, 54 Va. (13 Gratt.) 78, 86 (1855). See also, Campbell v. Bryant,104 Va. 509, 52 S.E. 638 (1905); Johnson v. Black, 103 Va. 477, 49 S.E. 633 (1905);Lynchburg & Rivermont St. R. R. Co. v. Dameron, 95 Va. 545, 28 S.E. 951 (1898);Redd v. Supervisors of Henry Cty., 72 Va. (31 Gratt.) 695 (1879); Eyre v. Jacob,Sheriff, 55 Va. (14 Gratt.) 423 (1858); Crenshaw v. Slate River Co., 27 Va. (6Rand.) 245 (1828); Goddin v. Crump, 35 Va. (8 Leigh) 120 (1837). For the ad-vantages of suing in equity, see Shenandoah Valley R.R. Co. v. Supervisors of ClarkeCty., 78 Va. (3 Hans.) 269 (1884). For alternative methods of challenging localactions, see 4. DILLON § 1570-1601.

14Roper v. McWhorter, 77 Va. (2 Hans.) 214 (1883) (standing to sue municipalityfor illegal disposition of its property). See Appalachian Elec. Co. v. Town of Galax,173 Va. 329, 4 S.E.2d 390 (1939) (standing to sue for illegal disposition of funds);

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UNIVERSITY OF RICHMOND LAW REVIEW

they sustained was that in common with all other taxpayers.15 This appealprerequisite is now rejected in Virginia in favor of identical requirementsfor standing to sue and standing to appeal.16

Equity has jurisdiction when a proper party seeks to enjoin the unlawfulacts of local officials.17 A taxpayer's standing as a proper party has beenbased on the economic threat of an unjustified increase in his tax burden,18

and by analogy to a shareholder in a private corporation.19 The mostpersuasive argument for taxpayer standing, however, is the lack of othereffective alternatives to control local misappropriation of funds, which arenecessitated by distrust of self-restraint on the part of the locality in theuse of its spending power. This necessity seems to outweigh the threat ofover-burdening court dockets. A taxpayer's standing effectuates a systemof checks and balances which places official action under the scrutiny ofjudicial review. 2° Such suits are designed to enable representative classactions brought on behalf of all taxpayers to challenge governmental actionwhich otherwise would go unchallenged.21 It would be as unreasonableto demand that a taxpayer sue only for his minute portion of illegally ex-pended funds as it would be to require all taxpayers to join in a suit. Oneauthority has suggested that there should be a single form of citizen action,Lynchburg & Rivermont St. R.R. Co. v. Dameron, 95 Va. 545, 28 S.E. 951 (1898)(standing to sue for illegal creation of a debt), cited in 13 MICHIE'S JURISPRUDENCE,Municipal Corporations, § 131, at 491 nn.3 & 4 (1951) ; Vaughan v. Town of Galax, 173Va. 335, 4 S.E.2d 386 (1939), and Cundiff v. Jeter, 172 Va. 470, 2 S.E.2d 436 (1939)(Taxpayers have standing to challenge elections held for determining whether bondsshould be issued as illegal.).

15 VA. CODE ANN. § 8-462 (3) (C) (1957) provides in part that "... any person think-ing himself aggrieved . . . by any final judgment, decree, or order in any civil case,may appeal" (emphasis added). If the jurisdiction of the Supreme Court of Appealsto hear an appeal is questioned, an appellant must show that he is such a "person."The degree of interest required to make an appellant a person within the purview of§ 8-462(3) (c) has varied with judicial interpretation. "Person" was first defined as onehaving a collateral interest in the suit. Sayre v. Grymes, 11 Va. (1 Hen. & M.) 403(1807). Subsequently, it was interpreted to mean an individual with a substan-tial, immediate, pecuniary interest exceeding that of the ordinary taxpayer. Nicholasv. Lawrence, 161 Va. 589, 171 S.E. 673 (1933). The Nicholas interpretationof person destroyed a taxpayer's power to appeal a challenge of illegal local expenditures.Gordon resolved the conflict by defining a person under § 8-462(3) (c) as one whohas standing to sue in the lower court. Thus, having standing to sue, a taxpayer caninitiate a suit without fear of having insufficient interest to appeal.

16 Gordon v. Board of Supervisors, 207 Va. 827, 153 S.E.2d 270 (1967).17 A proper party is one with sufficient individual interest to justify standing in court.

Note, 50 HARV. L. REV. supra note 3, at 1276.1 8 Frothingham v. Mellon, 262 U.S. at 486-87.19 4 DILLON § 1580.20 Note, 78 HARV. L. REV., supra note 12.21 Howard v. City of Boulder, 132 Colo. 401, 290 P.2d 237, 238 (1955).

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which would be competent to test state and local official conduct whethexor not the relief sought is positive (mandamus) or negative (injunction) inform.2 Virginia has not reached this point, but Gordon has firmly en-trenched the taxpayer's standing to challenge local expenditures withoutfear of having insufficient interest to appeal. The principal case also suggestssimilar decisions in suits against the state for illegal expenditure of publicfunds.

Taxatin-EXEMPTION-LEASEHOLD IN TAX EXEMPT LAND SUBJECT TOTAX IF USED FOR PRIVATE OR COMMERCIAL PURPOSE-AGREEMENT INLIEU OF TAXES UNCONSTITUTIONAL. Chesapeake Industrial DevelopmentAuthority v. Suthers, 208 Va. 51, 155 S.E. 2d 326 (1967).

The Chesapeake Industrial Development Authority was created by theCity Council of Chesapeake, Virginia, under an enabling act passed by theVirginia General Assembly.' The aim of the Authority was to encourageindustry to locate in the Chesapeake area. To further their goal, the Au-thority purchased a suitable tract of land and entered into a twenty-fiveyear lease with an out-of-state industry. 2 The land was to be paid for byrevenue bonds issued in the Authority's name,3 and the lessee agreed to

22 Jaffee, supra note 5, at 1296.

1 VA. CODE ANN. §§ 15.1-1373 through 15.1-1390 (1964) (Additional Supp. 1966).In the words of the Supreme Court of Appeals of Virginia, "The Act authorizes thegoverning body of any county, city, or town to create by ordinance an industrial devel-opment authority as a political subdivision of the Commonwealth, with such public andcorporate powers as are set forth in the Act to acquire, own, lease, and dispose ofproperties for the promotion of industry and the development of trade in such county,city, or town." Chesapeake Industrial Development Authority v. Suthers, 208 Va. 51,52, 155 S.E.2d 326, 328 (1967).

2 This Authority succeeded to the interest of the Chesapeake Port and IndustrialAuthority (which had originally encouraged the out-of-state industry to locate in Vir-ginia) in an Interim Financing Agreement. The agreement specified that the VirginiaNational Bank would lend two million dollars to the Authority to pay for the land,and the Authority would repay the Bank from the proceeds of the sale of tax-exemptrevenue bonds.

3 Revenue bonds were to be issued in the amount of three million dollars to be securedby an Indenture of Mortgage and Deed of Trust. With the bonds in the Authority'sname and payable from a fund established by the lessee's rental payments, they constituteda debt of the Authority and not the City of Chesapeake. This fully satisfies the CreditClause of § 185 of the Constitution of Virginia. VA. CONST. art. XIII, § 185 (1902).Chesapeake Industrial Development Authority v. Suthers, 208 Va. 51, 57, 58, 155S.E.2d 326, 332 (1967); Button v. Day, 208 Va. 494, 500, 158 S.E.2d 735, 739 (1968)(dictum).

Tax-exempt industrial revenue bond financing is an accepted practice in most statestoday. See generally Pinsky, State Constitutional Limitations On Public Industrial Fi-

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UNIVERSITY OF RICHMOND LAW REVIEW

pay a fixed amount of rent in lieu of, and equal to, local property taxesto the Authority.4 In order to insure the sale of the revenue bonds by testingthe Constitutionality of the Acts creating the Authority,5 its Chairman re-fused to sign the lease, and the Authority brought a writ of mandamus toforce his signature. 6 Held, writ of mandamus denied. Although the landitself may be tax-exempt, a leasehold interest whose beneficial use is forprivate or commercial purposes is subject to taxation, and any Act whichprovides for an agreement in lieu of taxes is unconstitutional.

Historically, commercial leaseholds severed from the public domain havebeen held the proper subject of taxation.7 Even under the interdiction ofMcCulloch v. Maryland,8 the Supreme Court of the United States hasheld that land leased by the Federal Government for commercial purposes,may be subjected to a state tax based on the value of 'the land.9 The Su-preme Court hinges its decisions on the amount of control exercised bythe Federal Government over the leased property. With a limited amountof governmental control, the leased property may be taxed, even thoughthe burden of the tax ultimately falls on the government. 10

In Virginia, the localities are the recipients of real estate taxes,11 and priorto 1955, they were unable to tax a leasehold interest because it was a chattelnancing: A Historical and Economic Approach, 111 U. PA. L. REV. 265 (1963);Note, The Public Purpose of Municipal Financing For Industrial Development, 70 YALEL. J. 789 (1961); Spiegel, Financing Private Ventures With Tax Exempt Bonds: ADeveloping "Truckhole" In The Tax Law, 17 STAN. L. REV. 223 (1965). For a briefdiscussion of Virginia's attitude, see Harris & Russell, Taxation, 1966-1967 AnnualSurvey of Virginia Law, 53 VA. L. REV. 1844, 1853 (1967).

4 Pursuant to VA. CODE ANN. § 15.1-1382 (1964) (Additional Supp. 1966), whichreads in part:

Included in the rental payments to be made by any lessee to the authority shallbe an amount in lieu of and equal to local property taxes and assessments uponproperty of the authority so leased. . . . Notwithstanding anything containedherein to the contrary, the authority and the political subdivision in which all orany part of the property for a particular facility of the authority is located mayagree at any time to a definite sum to be paid as local property taxes and assess-ments throughout the duration of the lease of a particular project.

5 VA. CODE ANN. § 15.1-1382 (1964) (Additional Supp. 1966).6 VA. CODE ANN. § 8-714 (1957). The Attorney General is given statutory

authority to bring a writ of mandamus to require an officer of the State to perform hisofficial statutory function. The officer, in refusing to act, questions the validity of thestatute, thereby bringing its constitutionality before the Court. Almond v. Day, 197Va. 782, 785, 91 S.E.2d 660, 661 (1956).

7 Trimble v. Seattle, 231 U.S. 638, 690 (1914) ; see Annot., 23 A.L.R. 248, 250 (1923).817 U.S. (4 Wheat.) 316 (1819).9 United States v. City of Detroit, 355 U.S. 466 (1958).10 United States v. Muskegon, 355 U.S. 484, 486 (1958); accord, United States v.

Boyd, 378 U.S. 39, 46 (1964).11VA. CONST. art. XIII, § 171 (1902) ; VA. CODE ANN. § 58-9 (1959).

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real and taxed as personalty.12 At that time the term "taxable real estate"was redefined to include ". . . a leasehold interest in every case in which theland . . . [was] exempt from assessment for taxation to the owner." 13

To complicate matters, however, the Virginia Constitution provides that allland owned directly or indirectly by the State is tax exempt,14 and, before1955 there had been no determination of what indirect ownership meant.1 s

If the Supreme Court of Appeals of Virginia had decided that a leaseholdinterest for private or commercial purposes in state land was owned in-directly by the State, the localities would still be unable to tax this interest,and one of the beneficial effects of the 1955 Amendment would be nullified.

In several recent decisions, the Supreme Court of Appeals eliminatedthe ambiguity. The Court defined indirect ownership by the State as owner-ship in that property whose "beneficial use is vested in a public corporationcreated, managed, and controlled by the State." 16 In applying this defini-tion, the Court has determined that there must be substantial state controlbefore there is indirect ownership. 17 Specifically, the Court held that a lease-hold owned by private individuals and leased to them by a State hospital,was subject to local property taxes, even though the hospital had dictatedthe use of the property.18

The Virginia Supreme Court of Appeals extended the above reasoningto the Suthers decision, thereby further enlarging the scope of "taxablereal estate." To arrive at their decision, the Court held a statute providingfor rental payments in lieu of taxes unconstitutional, even though the pay-ments were to be equal to local property taxes.19 What gave impetus tothe Court's decision was further statutory language providing for anagreement between the municipality and the Authority, as to the amountof local property taxes to be paid by the lessee.20 The Court reasoned that,

12 See Prince William County v. Thomason Park, 197 Va. 861, 867, 868, 91 S.E.2d441, 446 (1956); Sager, Property Classification For Taxation, 43 VA. L. REv. 1323,1332 (1957).

13 VA. CODE ANN. § 58-758 (1959).14 VA. CONST. art. XIII, § 183 (1902).15 Sager, supra note 12, at 1332.16 Citizens Foundation v. R.P.I., 207 Va. 174, 179, 148 S.E.2d 811, 815 (1966).

In this case a State college was in possession of the leased property; thus, there wassufficient State control.

17 See Shaia v. City of Richmond, 207 Va. 885, 153 S.E.2d 257 (1967), discussedbriefly in Harris & Russell, supra note 3, at 1845.

18 Shaia v. City of Richmond, 207 Va. 885, 153 S.E.2d 257 (1967). It is interestingto note that the lessees argued that their agreement with the hospital was not a leasebut a contract for services. The Supreme Court of Appeals, nevertheless, treated theagreement as a lease.

19 VA. CODE ANN. § 15.1-1382 (1964) (Additional Supp. 1966).2 0 VA. CODE ANN. § 15.1-1382 (1964) (Additional Supp. 1966).

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if there were an agreement as to the amount of local property taxes to bepaid by the lessee, this, in effect, could lead to a grant of tax immunityto the industry.21 Furthermore, if the taxes agreed upon were considerablylower than taxes on other industrial property, then the statute was repug-nant to the General Levy and Uniform Taxation Clauses of § 168 of theVirginia Constitution.22

It is nothing less than a truism to say that any agreement as to taxes,in and of itself, violates the General Levy Clause of § 168. Yet theCourt's second contention as to tax uniformity requires amplification. TheCourt contends that an agreement as to taxes will, in all probability, leadto taxes for this particular leasehold interest which are not uniform withthe taxes that would have been assessed had the agreement not been made.This argument implies that, if there were no agreement, the leaseholdinterest would be taxed by the municipality in the same manner as otherindustrial property.23 Section 168 of the Virginia Constitution, however,refers to uniformity as to classes of taxable property,24 and it could be arguedthat a leasehold acquired by an industrial authority for an avowed publicpurpose is a distinct class of taxable real estate. It follows, then, that amunicipality might classify this leasehold interest distinctly for tax pur-poses, with the result that taxes assessed thereon could be below that ofother industrial property, and remain within the constitutional limitationsof § 168. If the purpose of the agreement as to taxes provision of theenabling statute was to entice industries to Virginia by means of a taxbreak, the purpose might be fulfilled in this manner, consistent with theConstitution. With the broad scope of the Suthers decision, however, muni-cipalities may now feel that lessees of industrial authorities are not in adistinct real estate tax class, and, therefore, the ramifications of Sutherstake on greater significance.

Other ramifications of the opinion must be viewed in the light of Vir-

21 Chesapeake Industrial Development Authority v. Suthers, 208 Va. 51, 61, 155S.E.2d 326, 333 (1967).

22 VA. CONST. art XIII, § 168 (1902) provides in part as follows:. . . all taxes, whether state, local, or municipal, shall be uniform upon the sameclasses of subjects within the territorial limits of the authority levying the tax andshall be levied and collected under general law.

23 The Court also contended that there would be a lack of tax uniformity as to otherindustrial authority leaseholds similarly situated. This argument ignores the entirefunction of industrial development authorities. They are not created to provide newsources of tax revenue for the localities, but to stimulate industrial growth and economicactivity. Furthermore, only the Authority and the municipality were to agree as to taxes,not the various lessees, and the Authority could establish a uniform classification.

24 VA. CONST. art. XIII, § 168 (1902).

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ginia's inducements to out-of-state industry,25 and the establishment ofIndustrial Development Authorities which have been consistently held tobe for a public purpose. 26 This acceptance remains unaffected by theSuthers opinion. The Virginia Constitution specifically provides that theGeneral Assembly may allow localities to exempt manufacturers from taxas an inducement.2 7 A few states, under appropriate statutes, exemptland used for a public purpose,28 but businessmen and economic au-thorities do not see the need for this type of incentive.p Businessmen donot consider tax exemptions one of the five major inducements to industriallocation,30 nor were exemptions considered of major importance in anadvisory report to the Virginia State Legislature in 1957.31

Looking at the Suthers opinion, the Supreme Court of Appeals has25 VA. CONST. art. XIII, § 189 (1902) reads as follows:

The General Assembly may, by general law, authorize the governing bodies ofcities, towns, and counties to exempt manufacturing establishments and works ofinternal improvements from local taxation for a period of notexceeding five years,as an inducement to their location.

S.J. Res. 11, 12, ACTS OF ASSEMBLY 1114 (1958) aimed at encouraging a "healthybusiness climate in Virginia." See also Note, Legal Limitations On Public InducementsTo Industrial Location, 59 CoLuas. L. Rav. 618 n.6 (1959). From a historical view-point the Colony of Virginia, in 1662, offered a bounty of five pounds of tobaccofor each yard of woolen cloth made in the Colony. Pinsky, supra note 3, at 266 n.4.

2 6 See, e.g., Fairfax Industrial Development Authority v. Coyner, 207 Va. 351, 150S.E.2d 87 (1966) ; Cf. Harrison v. Day, 202 Va. 967, 121 S.E.2d 615 (1962) ; Harrison v.Day, 200 Va. 764, 107 S.E. 2d 594 (1959). But see Button v. Day, 208 Va. 494, 158S.E.2d 735 (1968), where the Supreme Court of Appeals held a fund established by theState to guarantee loans for industrial projects to be a violation of the Credit Clause of§ 185 of the Virginia Constitution. For a review of decisions in other jurisdictions, seeState v. Barczak, 34 Wis.2d 57, 148 N.W.2d 683 (1967).

2 7 VA. CONST. art XIII, § 189 (1902). Virginia's enabling statute was repealed in1944.

2 8 See, e.g., Graf v. Warren, 10 Ohio St.2d 33, 225 N.E.2d 633 (1967); Appeal ofAllegheny County, 425 Pa. 578, 229 A.2d 890 (1967); Wayland v. Snapp, 334 S.W.2d633 (Ark. 1960). In support of the arguments advanced in these cases, it should bepointed out that, although the development authorities are created for an avowed publicpurpose, it is the private industry which carries out that purpose. The industry providesjobs and thereby reduces unemployment, and the industry boosts the economy, not theauthority.

29See Antieau, Municipal Power To Tax: Its Constitutional Limitations, 8 VAND.L. RnV. 698, 734, 749-50 (1955); Stimson, The Exemption Of Property From TaxationIn The United States, 18 MINN. L. REv. 411 (1934); Garwood, Taxes And IndustrialLocation, 5 NAT'L TAx J. 361, 365 (1952); Eiteman, Effect Of Franchise Taxes UponCorporate Location, 9 So. EcoN. J. 234 (1943); Steiner, The Tax System And In-dustrial Development, BULL. NAT'L TAx ASS'N 98 (1938).

30 Garwood, supra note 29, at 368, lists markets, materials, labor, available sites andplant facilities, and climate.

31 REPORT OF FISCAL STUDY COMMITTEE, ADViSORY COUNCIL ON THE VIRGINIAEcONOMY 32 (1957).

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obviously weighed the needs of the localities against the inconclusiveshowing of tax exemption benefits on industrial location. Analytically,the Court's holding was a policy decision, built upon a strict interpretationof those sections of the Virginia Constitution which provide for taxexemption and uniformity of taxation. Although the effect of the Court'sopinion may be negligible as regards Virginia's inducements to out-of-state industry, the opinion will provide new sources of tax revenue forthe localities. Yet, what the Court has overlooked in its zeal to enlargethe scope of taxable real estate, is the primary purpose of industrial develop-ment authorities. These Authorities serve to stimulate industrial growthand boost the State's economy by encouraging industry to locate in Virginia.

In the past, it never has been the principal goal of industrial financingprograms (in Virginia or elsewhere) to produce tax revenue for thelocalities.3 2 This still remains the attitude of industrial authorities, un-changed by the Suthers opinion. The changes effected by Suthers will comein the attitude of the Virginia General Assembly toward tax exemptionson industrial location. In the past, the Assembly has considered tax exemp-tions as a major inducement to out-of-state industry. For the future, beforeit makes any major constitutional or legislative changes exempting industrialauthority leaseholds from taxation, the Assembly should remember thattax exemptions are only an inducement to industry, not the inducement.

32 Pinsky, supra note 3, at 320.